Unions, Employers Gear Up To Lobby On Drug-Rebate-Related Policy

The pilot CMS is using to artificially lower Medicare Advantage and drug-plan premiums next year will not apply to group MA plans, which means that 4.3 million retired union workers and state and local government employees could be hit with drastically higher premiums if HHS follows through on its proposal to ban drug rebates that aren’t shared at the point of sale. Employers and unions are planning a lobby effort aimed at getting CMS to help so-called employer group waiver plans (EGWPs) avoid premium spikes and are developing policies to suggest to the agency.

HHS’ proposed rebate rule is expected to lead to higher Medicare Part D premiums, so CMS has a plan to keep premiums artificially low for two years. CMS plans to let insurers participate in a pilot that narrows risk corridors from 5% to 0.5%, according to a CMS guidance. That means insurers would cover the 0.5% of the cost of underestimating premiums, and beyond that amount Medicare would cover 95% of the cost. Insurers compete on premiums, so the extra market share they gain from setting premiums low is expected to offset the cost of underestimating premiums.

However, the pilot does not apply to group MA plans because it is based on risk corridor payments, which are based on bids, and EGWPs do not bid and therefore do not receive risk corridor payments. Instead, CMS administratively sets pay rates for group MA plans by averaging bids of regular MA plans that do submit bids.

Group MA plans are popular with unions, state and local governments, and highly-unionized companies with many retirees. EGWP enrollment grew 12 percent in last year, according to the March report by the Medicare Payment Advisory Commission, and group MA plans now account for 20 percent of Medicare Advantage. A large portion of the recent growth in the group MA market has come from state and local governments.

“That’s where we’ve seen growth,” said Better Medicare Alliance President and CEO Allyson Schwartz. “It enables millions of retirees to continue to have health benefits that were promised them.”

Those retirees could be hit with a spike in premiums because group MA plans can’t shift costs around like regular MA plans do by reorganizing benefits and cost sharing. For example, the Teachers’ Retirement System of Kentucky estimates that if rebates were required to be passed through to beneficiaries at the point-of-sale in 2018, the plan would have needed to increase monthly premiums by an average of $64 for the 35,000 retired teachers in the state’s group MA plan.

Schwartz said her organization is running policy ideas by members, though the Better Medicare Alliance would prefer that CMS ax the proposed rebate rule instead of temporarily protecting beneficiaries against premium increases. One option is for CMS to make payments to group MA plans that are an average of the risk corridor payments to regular MA plans, a lobbyist following the issue said.

The Better Medicare Alliance plans to engage senators and governors’ offices in states where MA plans are concentrated, including Michigan, California, New York and Florida.

The top five insurers covered more than 80% of group MA enrollees as of December 2017, according to Mark Farrah Associates. At that time, UnitedHealth enrolled more than 1.15 million group plan members, according to the publisher of business information and analytics for the healthcare industry. Aetna and Kaiser Foundation Group have more than half a million enrollees each, and Humana and Blue Cross Blue Shield of Michigan also command a sizeable stake in the group MA market.

Humana Chief Financial Officer Brian Kane said May 1 during an earnings call that the proposed rebate rule would lead to significant premium increases for beneficiaries in group-MA plans.

“Rebates at the point of sale do impact group MA disproportionately relative to individual MA or PDP because the risk corridor proposal, that ability that CMS has given us in terms of risk corridor protection, does not apply to group MA,” Kane said. “So we will see, if that goes into effect, likely significant premium increases on the group MA side.” -- John Wilkerson (jwilkerson@iwpnews.com)